Are Investors Buying the Recovery in Automakers?

Last month, US auto sales increased 7.5%, the second fastest pace of the year in the face of a damaged economy.  Many analysts believe that consumers are finally breaking down and purchasing new cars.  Investors may be eager to purchase equities to play the sales increase,but stock prices are not pointing to a recovery in automakers.

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Despite better sales data, shares of both Ford (NYSE:F) and General Motors (NYSE:GM) are down nearly 40% year-to-date.  Ford reported its new-vehicle sales increased 6.2% to 167,502 vehicles last month, while General Motors reported a 1.7% increase to 186,895 vehicles.  Ford received a boost from its F-Series pick-up trucks, as sales jumped 7% to over 52,000 trucks.  Sales of Ford’s Escape SUV jumped 30%.  General Motors saw a 6% increase in sales in its Chevrolet brand, while its Cadillac brand suffered a 12% decline.  Auto sales in 2009 and 2010 slumped heavily, and the recent rise may be those consumers finally coming to the market with new incentives from auto makers.

However, The Car Connection reports that more car sales mean fewer incentives and discounts from manufacturers, especially since the excess inventory that’s plagued the industry in recent years has been nearly eliminated.  Smartmoney recently reported data that showed Ford reduced available incentives by 13% in October, and is cutting rebates even more in November.

The market is still not buying the recovery story for the American consumer.  This is evident by AutoZone Inc. (NYSE:AZO) shares climbing nearly 18% higher this year.  Investors continue to believe that consumers will be forced to repair their current vehicle, as opposed to buying a new vehicle.

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